Covance Q1 Profit Up 5%, Beats View; Narrows 2014 Outlook

(RTTNews) - Drug development company Covance Inc. (CVD) on Thursday reported a 5 percent increase in profit for the first quarter from last year, reflecting higher revenues and margins. Adjusted earnings per share for the quarter beat analysts' estimates, while revenues missed their expectations.

Looking ahead to fiscal 2014, Covance tightened its earnings outlook and also lowered the top end of its revenue growth range. Shares of the company declined more than 6 percent in extended trades. In a separate statement, Covance announced the launch of its new brand, Solutions Made Real.

The Princeton, New Jersey-based company's net income for the first quarter was $50.8 million or $0.88 per share, up from $48.2 million or $0.86 per share in the year-ago quarter.

The latest quarter's results include a gain sale of the company's Seattle genomics laboratory of $1.6 million and charges associated with restructuring and other cost reduction actions totaling $4.1 million. The prior-year period's results include gain on sale of $15.7 million and restructuring costs of $6.2 million.

Excluding items, adjusted net income for the first quarter was $52.4 million or $0.90 per share, compared to $42.3 million or $0.75 per share in the prior-year quarter. Analysts polled by Thomson Reuters expected the company to earn $0.89 per share for the quarter. Analysts' estimates typically exclude special items.

Net revenue for the quarter rose 7 percent to $620.1 million from $580.2 million in the year-ago period. Analysts had a consensus revenue estimate of $632.18 million for the quarter.

Operating margin for the quarter expanded to 10.9 percent from 8.3 percent in the prior-year period.

Early Development segment revenues for the quarter increased 5 percent from the previous-year quarter to $218.2 million, reflecting growth in clinical pharmacology and toxicology that more than offset a decline in discovery support and the impact of the sale of the Seattle genomics laboratory. The segment includes preclinical toxicology, analytical chemistry, clinical pharmacology, discovery support, and research products.

Late-Stage Development segment revenues for the quarter grew 8 percent to $401.8 million. Year-over-year growth was driven by 10.9 percent growth in central laboratories and 5.7 percent growth in clinical development, which more than offset a decline in the company's market access services. The segment includes central laboratory, Phase IIb-IV clinical development, and market access services.

Looking ahead to fiscal 2014, Covance now expects revenue growth of 6 percent to 9 percent, and adjusted earnings per share of $3.70 to $3.95. Previously, the company expected revenue growth of 6 percent to 10 percent, and adjusted earnings in a range of $3.65 to $4.00 per share.

Analysts currently expect the company to earn $3.86 per share for the year on revenue growth of 8.9 percent to $2.62 billion.

In a separate statement, Covance announced the launch of its new brand, Solutions Made Real.

Joe Herring, Chairman and Chief Executive Officer of Covance said, "With the healthcare, biopharmaceutical and food industries continuing to evolve, our clients now expect more proactive, insightful and resourceful solutions. The old paradigm of using outsourcing as simply auxiliary arms and legs has given way to a more comprehensive, thoughtful approach."

CVD closed Thursday's regular trading session at $88.03, down $0.25 or 0.28 percent on a volume of 1.15 million shares. In after-hours, the stock further declined $5.53 or 6.28 percent to $82.50.